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Elliott on the offensive again in Telecom Italia battle with Vivendi

‘Activist investor’ Elliott Advisors has issued a rebuttal of Telecom Italia’s (TIM) rejection of its plan to break up the company and “unlock significant value” as the hedge fund and TIM’s largest shareholder Vivendi battle for control of the Italian telco’s board.

Addressing TIM’s argument that its share price had declined by 70% in the 10 years before Vivendi came on board, Elliott highlighted the ongoing decline in TIM’s stock price over the last two years. Against Vivendi’s claim that its share price had recovered since last June while other telco stocks had floundered, Elliott said that TIM had only outperformed the Stoxx Europe 600/Telcos index over that period by under 1%.

Elliott also reiterated its argument that the Vivendi-led ‘industrial strategy’ for the company had “benefited itself” rather than TIM, citing moves to create a JV with Canal+ and the award of a contract to Havas.

Elliott argues that there were other “numerous examples” of Vivendi acting in its own interest, including blocking the conversion of saving shares into ordinary shares, which would reduce the French media company’s voting interest in the company, and its appointment of allegedly “non-independent directors and…managers with conflicting roles”.

One of the key arguments raised by TIM and Vivendi concerns Elliott’s advocacy of the complete separation of TIM’s network arm as a lynchpin of its plan to “unlock value” for shareholders. Against TIM’s case that deconsolidation had “proven a failure in the few countries in which it has been tried”, Elliott cited the Czech Republic, where it said separation had “created significant value for shareholders of O2 Czech”.

In comments that highlight what is possibly Vivendi’s weak point in its struggle to direct TIM, Elliott repeatedly highlighted the media group’s battle with Italian regulators and legislators on multiple fronts, including the government’s invocation of the ‘Golden Power’ to intervene where it believes assets of strategic significance are threatened, CONSOB’s investigations into the company and Vivendi’s battle over simultaneously holding large stakes in Mediaset and TIM .

Elliott also denied that it has any issue with TIM’s current management team headed by Vivendi appointee Amos Genish and said its only concern was “to address a track record of poor governance and a lack of stewardship, systemic since Vivendi nominees were appointed to the board in December 2015”.

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